Trump Fires Fed Governor, Aims to Reshape Central Bank Now

URGENT UPDATE: Donald Trump has escalated his campaign to gain control over the United States Federal Reserve by firing Lisa Cook, one of its board governors, just announced today. This move could significantly alter the central bank’s direction, allowing Trump to pursue aggressive interest rate cuts that he has been advocating for.

In a letter addressed to Cook, Trump accused her of making “false statements” related to two mortgages in Michigan and Georgia. Cook has publicly stated she will not resign and has retained legal counsel to contest the firing. This contentious situation places Trump in a position to potentially reshape the board’s majority and influence critical monetary policy decisions.

Analyst Jaret Seiberg from TD Securities remarked, “President Trump’s decision to fire Lisa Cook as Fed governor gives him the ability to gain a majority at the Federal Reserve Board and to influence the broader composition of the FOMC (Federal Open Market Committee).” If Trump’s strategy succeeds, it could pave the way for policies more aligned with his interests, particularly regarding rate cuts.

Cook’s dismissal coincides with Trump’s recent nomination of his economic advisor, Stephen Miran, to fill a forthcoming vacancy on the Fed board. Should Cook’s firing go through, the Fed board could shift to a 4-3 split favoring advocates of lower rates, including Miran, Cook’s replacement, and current governors Michelle Bowman and Chris Waller.

This potential shift is critical; Bowman and Waller dissented during the last Fed meeting on July 30, 2023, marking the first instance of dissent since 1993. Their dissent could lead to heightened volatility in the stock market and increased inflation expectations, warns Torsten Slok, chief economist at Apollo Global Management Inc.

Trump’s advocacy for lower interest rates stems from his desire to devalue the U.S. dollar and ease borrowing costs, as he has openly criticized the Fed for keeping rates within the current range of 4.25% to 4.5%. His ire has particularly targeted Fed Chair Jerome Powell, whom he has suggested should be removed.

Market analysts express concern that a Fed aligned with Trump’s political agenda could jeopardize the central bank’s main responsibility: controlling inflation. The fear extends beyond board appointments; a Trump-friendly Fed could also influence the selection of presidents at the 12 Federal Reserve banks across the U.S., whose positions will be up for renewal in early 2026.

Derek Holt, vice-president at Bank of Nova Scotia Capital Markets Economics, stated, “Such a scenario — stacking the board and regional presidents — risks a severe blow to confidence in U.S. markets.”

The implications could be dire if Trump gains a cooperative FOMC, allowing him to reject reserve bank presidents who do not align with his strategies for rate cuts. This ongoing political maneuvering raises alarms among investors and economists alike, who fear the consequences of a politicized Federal Reserve.

As this story develops, the market will be watching closely for further actions from the Trump administration and their potential impacts on economic policy and stability.

Stay tuned for updates on this evolving situation and its ramifications for the U.S. economy.